Stock Market Highlight #6
April 22nd, 1998 stock market high in most averages identified to the very day through intraday "ascending triangle" chart pattern and "Astro Points".
(COMMENT #s 331, 336)
UPDATED 19980418
COMMENT 1998-331
1. Speaking of which . . .
this freight train has just reversed a pretty classic set-up . . .
. . . AGAIN!
2. Astonishingly, several of the major DIVERGENCES remain (I know you're probably tired of hearing of this stuff).
3. As an example, the DJTA has made four new highs over the last 2 months (980213, 980317, 980406, and 980416) with each successive new high in price UNCONFIRMED by momentum oscillators as RSI and Slow Stochastics (see pages 171-184 of "The $upertrader's Reference Manual").
4. Same thing in the DJIA at the 980320, 980406, and 980415 new highs and at today's new high.
5. The DJTA, SPY, SPM, VLM, VLY, NYM, NYY, NQM, NQY, RTY, RTM and so on all failed to CONFIRM today's new high in the DJIA ("Y" identifies the cash market).
6. The hourly in the DJIA is (again) a CLASSIC as the new highs (see Point # 4 of this COMMENT) are all again not being CONFIRMED by RSI.
7. Each is successively lower that at the previous high.
8. Remember the ascending diagonal triangle chart in COMMENT # 325?
9. If one connects the highs in the DJIA of 980406 and 980416 and the lows of 980408 and 980416 on an hourly chart, the same ascending diagonal triangle may be seen.
10. This ascending diagonal triangle has the same implications as did Wednesday's ascending diagonal triangle (see Point #s 7. & 8. of COMMENT # 325 which produced Thursday's early and sharp selloff).
11. Indeed, Friday's overnight low in the SPM was, at one point, down 2350 from Wednesday's close and even broke the low of 980408 thereby making the first 10 day low since the rally began 980112.
12. The SPM has formed an interesting "head and shoulders" formation with both shoulders 8 days from the 980406 head (assuming Friday's high is not broken).
13. If Wednesday's high in the NQM is not broken, this market will have also formed an interesting, very proportional "head and shoulders" formation.
14. Here the "head" is centered 1 trading day earlier on 980403.
15. Both shoulders are 7 days from the 980406 head (instead of 8) including Wednesday's right shoulder.
16. Since the SPM broke and closed above Wednesday's high while the NQM did not even break Wednesday's intraday high, it is likely that the relative strength between the SPM / NQM is switching back to the SPM. This switch might be due to the internet stocks, which led the recent surge, petering out.
17. The entry technique on pages 205-209 of "The $upertrader's Reference Manual" is thus especially appropriate Monday for the NQM.
18. The SPM remained near its lows on Thursday for over the last half of the day and returned to challenge those lows early Friday. Hence, for those following the chart in COMMENT # 325, more than sufficient time was provided to lower stops below breakeven.
18. It's a shame it didn't work out.
19. I'd love to have 100 or so such setups each year.
20. What about the Elliott Wave?
21. Who knows in the SPM (not clear enough, in my opinion).
22. But in the NQM, the rally up to Wednesday's high consumed 33 hours (FIBONACCI # = 34) while the ratio of the assumed "B" or "2" wave at Wednesday's high to the initial downmove was 1.737 : 1 (SQ RT 3 = 1.732).
23. Since Wednesday's high, price declined in a clear 5 waves to Thursday's early morning low and then rallied to Friday's late high in what appears to be a 3 wave movement.
24. Remember, 5 wave moves suggest trend, while 3 wave moves suggest correction.
25. Hence, the 5-3 sequence would suggest that the next move will be 5 waves down.
26. The ratio of the correction to the initial move down off Wednesday's high is 3.063 : 1 (FIBONACCI and LUCAS #s = 3).
27. Hence, the two corrective "waves" (an assumed "B" or "2" and a "ii") are related by the ratio to their initial declining "wave", SQ RT 3.000 and 3.000.
28. Also, the ratio of "c" : "a" = 1.389 (SQ 1/PHI + 1.000 = 1.382).
29. Hence, in spite of a very impressive day to the upside, there is still a lot to suggest that the surge spent itself on Friday or will do so early Monday morning, that the DJIA DIVERGENCE peak discussed previously is still the most likely scenario, and that the "B" or "2" wave correction in the stock indexes other than the DJIA is also still the best interpretation with the DJIA completing an ascending diagonal triangle which is suggestive of a terminal 5th wave (see the "TOP TICK REPORT").
30. We should find out early Monday if such remains the most probable expectation as the stock indexes are close, again, to their all-time highs.
31. Great, LOW RISK, shorting opportunity.
32. See pages 85, 89, and 93 of "The 1998-99 $upertrader's Book of Linear Time Cycles".
33. Can you now turn to page 293, 297, and 301 in the same book and see when the weekly "Inversion Cycle Indexes" are next projected (see the dotted line at the bottom of the page)?
34. Can you now look in the same charts and see what the "Linear Time Cycle Index" (the solid line) is doing over the next several weeks or so (Friday ended the 16th week of the year)?
35. Hmmmmm!
36. Now turn to page 172 of "The 1998 $upertrader's Almanac - 1st Half Edition".
37. Take a look at the "AVPF" (average profit) in seasonal trade #s 158, 160, and 161.
38. Has this upcoming period been strong for these markets over the last 5 years or what?
39. What this data suggests is that, if we are going to have a "blow off" top, it is getting ready to happen and was likely conditioned by the mergers in the financial sector and the internet stock performance of late.
40. Don't forget, too, that 1994, 1996, and 1997 experienced pretty good selloffs into April prior to May runs (hence, the reason the numbers on page 172 are so big)!
UPDATED 19980422
COMMENT 1998-336
1. OK, here's a chart at the end of this COMMENT as of 14:00 CST today.
2. It would appear that the "upside blowoff" is being experienced in and extended in the internet stocks.
3. Most of the DIVERGENCES continue with the hourlies in the DJIA and DJTA being CLASSIC (see pages 171-184 of "The $upertrader's Reference Manual).
4. The chart shows hourly DJIA prices.
5. The "ascending diagonal triangle", a sign of a terminal Elliott 5th Wave, is shown in the chart by the two up trendlines that near convergence in the upper right portion of the chart.
6. Of course, it is true that the triangle formation, though usually very reliable, only projects down to the previous 4th wave of larger degree which, in this case, appears to be the lower horizontal line.
7. These formations, however, often occur at major peaks.
8. This was the formation projected to occur at the next MAJOR peak in the "TOP TICK" report.
9. The number of hours in the 1st and 3rd waves is 29 and 30. 22 in the 5th so far. Nothing insightful here, but see page 398 of "The 1998 $upertrader's Almanac - 1st Half Edition" and preceding discussion on pages 392 to 397.
10. In this pattern, you should be able to breakdown each of the 5 waves into a series of smaller degree movements of 3 waves each.
11. This is occurring as the SPM is trading up to 114000 which is just a smidgen below its high of 114230.
12. Hence, again, an excellent point of low risk / high potential reward for shorts.
13. As I write this in the afternoon, it would appear that the entry technique shown on page 236 of "The $upertrader's Reference Manual" is in order which should lower risk further.
14. In points, wave 1 = 345.8, wave 3 = 302.9, and wave 5 = 146.2 (FIBONACCI # = 144).
15. For waves 1 and 3, they are both approximately the same amount above and below LUCAS # = 322.
16. If this is an important near term peak, it is not quite as proportionate as one might normally expect.
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